Vaxcyte, Inc. (PCVX) Earnings Call Transcript & Summary

Good afternoon, everyone. Thanks for joining the BofA Annual Healthcare Conference. My name is Chi Fong. I'm one of the associates who work on Jason Gerberry's biopharmacy here at Bank of America. I'm pleased to introduce Grant Pickering, co-Founder and CEO of Vaxcyte. Vaxcyte's a development stage biopharma company developing next-generation vaccines, and Grant will kick things off with the company's presentation. After that, he will be joined by some of his colleagues in our Q&A. So now I'll turn the floor to Grant so to speak for the opening presentation.

Yes. Thanks, Chi. I'd like to thank the BofA team for inviting us. We appreciate this opportunity to tell the Vaxcyte story. Can I get the slides brought up so they can appear on the screen? Or do I pull those up myself? That's okay. All right. Just give me a sec to pull them up. I have them pretty much memorized but not entirely. So first things first, we're developing novel and superior vaccines to prevent or treat the leading causes of death from infectious disease. That's the focus of the company. And I would direct you all to our public filings on the SEC website, so as to ensure that you have the appropriate caveats associated with the forward-looking statements that we're going to make today. And then if I can turn you to the corporate highlights slide as I get these pulled up, yes, the headliner for Vaxcyte is our ability to make broad-spectrum pneumococcal conjugate vaccines led by VAX-24 and VAX-XP as the fast follower to follow VAX-24 as we advance that program into the clinic. What we have done is built this company on top of the cell-free protein synthesis platform that enables us to make these broader spectrum conjugates with a higher degree of confidence than conventional chemistry will allow. And the cell-free system is what allows us to perform the site-specific conjugation that's the fundamental enabler of that. It also allows us to make tough-to-make proteins, which we think can enable novel vaccines, which is part of our pipeline story at this moment. We've been very careful about how we purpose the technology. We chose the pneumococcal conjugate vaccine space because it's a well-defined segment, sells over $7 billion worth of pneumococcal vaccines on an annual basis. We understand very clearly how those vaccines work and what the limits are with conventional technology, and we believe that we can purpose our technology in place that don't run afoul of those well-understood mechanisms but yet are able to push the spectrum in ways that could create a best-in-class vaccine. Because that category has already been well defined, there are now validated surrogate immune endpoints that prevent the need for a field efficacy study for which we've all been watching them unfold with COVID vaccines. And when you have a novel vaccine, you need to make that correlation in the clinic to show that antibody titers of a certain threshold will correlate with protection. That's already been established. So now you just need to show antibody titers that are non-inferior relative to the approved vaccines. So that's considerably more efficient and less risky than having to run on those large field efficacy studies. Beyond the PCV franchise, we do have 2 other new programs that we're very excited about. One is another conjugate vaccine. It's called VAX-A1. That's to target and prevent disease associated with Group A Strep infections. We believe that has utility in both adults and children, and we have a periodontitis therapeutic vaccine, and it's one of these tough to make protein-based programs that I mentioned. We work very thoughtfully to align the resources to put us in a position to operate in order to capitalize on these opportunities. We have a strategic alignment with Lonza, where our pneumococcal conjugate vaccines are being produced. And manufacturing, as we all know, is critical to get right so as to be able to capitalize on a widely distributed and widely used vaccine like a PCV. We think we've built a great team. We took the company public last year with BofA's help and have over $370 million on the balance sheet at this moment. When we get to the Q&A section, I have a few of my colleagues joining me today, Jim, our COO; Andrew, our CFO and President; and Jeff, one of our co-founders and Head of R&D, will join us for the Q&A. We've been able to attract a number of former heads of R&D for the major vaccine companies, so we've really built a stable of vaccine domain expertise to help us shepherd this platform and purpose it for the vaccine field. As I mentioned, the pipeline, VAX-24 is very much the lead. This is a vaccine that we'll be developing both for adults and infants for the prevention of invasive pneumococcal disease. We are in the later stages of the IND enablement. We're guiding toward an IND filing in the first half of next year, and that will put us in a position to generate the clinical proof-of-concept data late in 2022 or early 2023, depending on when the IP is submitted and accepted. Beyond that, the VAX-XP program is an even broader spectrum vaccine that we'll be looking to develop as a follow on to VAX-24. And as I mentioned, VAX-A1 and VAX-PG are also coming along the pipeline as well. Let's talk a little bit more in detail about the PCV space. Here's the layout. Merck -- sorry, Pfizer effectively has a monopoly position with Prevnar as it relates to the other PCV that's approved from Glaxo, which is really just used in the developing world, so about $7 billion generated. Nearly all of that goes toward Prevnar, but there's an older vaccine from Merck that continues to get used. It's about $1 billion in sales each year, and the standard of care at the moment, if you look at the bottom of the slide on Slide 8, is the use of Prevnar followed by the use of PNEUMOVAX. And the reason this older, less effective vaccine continues to get used is because of that incremental stream coverage for which you get some antibody responses. You don't get the T cell health that you get with Prevnar, so it's decidedly inferior but it's still necessary. And that's the rationale behind our 24-valent pneumococcal conjugate vaccine, so as to bring the efficacy profile of Prevnar but across a full spectrum that would allow the discontinued use of PNEUMOVAX as a second vaccine, which would be a big advantage. We don't believe any of the current PCVs, even those on file with the agency, will be able to make that same claim. So what's really driving these broader spectrum vaccines? It's the epidemiological footprint. So if you look at the bottom left of Slide 9, you can see that the cases associated with those strains that are in the current PCV, which is Prevnar 13, once that vaccine started to get used on a widespread basis about 15 years ago, you could see the disease associated with those strains dropped precipitously, but they are replaced by other opportunistic strains of strep pneumonia that have now overtaken that and are the key driver for the need for a broader spectrum vaccines. You can see the green line going up precipitously. And that's led to the development of broader spectrum forms of PCVs, including the latest version from Pfizer, which is a 20-valent form. But if you look at the bottom right of Slide 9, what you see is increasing amounts of the diphtheria toxin that drives the T cell health that's required to get an appropriate response. It's going to be protective. And it's that carrier protein that when used in greater abundance actually distracts the immune system away from the polysaccharide-directed antibodies that are actually what clear the bacteria. So as they add more conjugates, they see a diminution of the antibody responses against the targets. And so you see that on Slide 10. The bottom left is the comparator study where Prevnar 13 was compared to Prevnar 7. And what you see is this drop of anywhere from 15% to 30-plus percent in the antibody titers for every common strain in the broader spectrum vaccine. So this is the downside of the protein carrier when you need more and more amounts of it. And that was also shown again with Prevnar 20 when it was compared to Prevnar 13 in the adult population. Once again, across the board, another 15% to 38% drop in the antibody titer's evidence. So that's the bad trade. And so this was the opportunity that we saw with our technology was to take the exact same protein carrier, and I'm on Slide 12 now. And if you look at the left-hand side of this slide, you see the ribbon structure for CRM197, which is this detoxified enterotoxin that is the protein carrier in Prevnar. And when they use it, they covalently bond the polysaccharide sugars to this protein, but the chemistry that they use is antiquated to the extent that it randomly conjugates to any of 39 different lysines on that protein. The problem with that is a multitude of those lysines are co-resident with the T cell epitopes that are the reason why that protein has any effect that's positive at all. And so when they covalently bond the polysaccharide over those T cell epitopes, you get no benefit from the protein. And instead, you actually are only then getting antibodies against the protein that will compete for what T cell health is going to be generated from other conjugates that aren't masked. And it's that distraction that diminishes the antibody titers that we just showed you that have been evidenced to date. So what we're doing is taking the cell-free protein synthesis platform, inserting non-native amino acids into the same protein structure, but in place of lysines that are outside of those T cell epitope regions. So when we covalently bond the polysaccharides, we're leaving those T cell epitopes exposed in each conjugate that we make. And so the way that we purpose that was to actually make each of our conjugates with less protein relative to the amount of polysaccharide. And we were able to do that, because with those T cell epitopes exposed, we could get away with less protein per conjugate without sacrificing the immunogenicity that you need to ultimately get a predictive response. That's our belief. And so when we add our 24 conjugates into a single mixture, we're targeting a similar amount of the protein that is in Prevnar 13, whereas you've seen from the previous data, when they go to Prevnar 20, they end up with substantially more protein than what they had with Prevnar 13 historically. One of the other things I want to point out before I show you some data and we wrap is that when we make our conjugates, they end up within a very similar physical chemical structure to what has been conventionally shown with Prevnar. And that is important because they presented these large inter-strand matrix-like structures that are decidedly immunogenic and the immune system has a very robust response to them. So we're able to end up with that same sort of characteristic profile, but with less protein in that mixture. So we think that's really fundamental to what we're seeing in animals with regard to the immunogenicity, and we certainly hope that translates into the response in people. So here's a quick snapshot of the data that we've been able to generate. As I mentioned, in order to get a full approval for a PCV, you need to show non-inferior antibody responses to the standard of care. And here, what you're looking at are IgG antibody titers for our 24-valent PCV compared to the 13 valent current standard of care, which is Prevnar 13. Our conjugates are the green columns. Prevnar is the purple columns. I'm on Slide 13, and PNEUMOVAX is the gray columns. And what you can see is even though we have substantially less protein in each of our conjugates, we're still showing antibody titer responses that are as good and, in some cases, better than Prevnar and substantially better than those that are generated with PNEUMOVAX. So this is the data that has given us the confidence to advance this program into the clinic, and we're busily working through the final stages of that GMP production in order to facilitate the IND filing in the first half of next year, and it's that same technology, I'm on Slide 14, that underpins not only the VAX-24 program, but also VAX-XP, which is a 30-plus valent vaccine, which we've also recently presented very compelling immunogenicity in the same animal model that we just showed you on the last slide. So together, those 2 programs are our PCV franchise strategy, starting with VAX-24, but these vaccines are so effective that once the 24-valent PCV is introduced, we believe that there'll be even more pressure on already circulating strains that are starting to be more and more relevant, but that will only accelerate in the face of the 24-valent vaccines availability, which we hope to be able to bring to the market as soon as practical. Finally, where are we headed from an FDA strategy perspective? We're leveraging these validated surrogate immune endpoints that I referenced, and I talked about the standard, but I didn't mention that the non-inferior standard is actually 50% or greater of the antibody titers of the standard of care. So that has been the precedent that's been established. And as you see from the preclinical immunogenicity data, we have very compelling data at this stage, and we certainly hope to replicate that in the clinic. And lastly, the Phase II data that we'll be generating in our clinical proof-of-concept study is going to be a study that's structured in ways that we would expect to be very, very similar to what we would need to generate from a pivotal Phase III perspective. So that's why we are calling that a clinical proof-of-concept study. If that data is as compelling as we hope, it would be a great confidence inducer to be able to generate that again in a follow on Phase III pivotal study. We've had our discussions with the FDA in a pre-IND forum. As I mentioned, from a milestone perspective, we're working toward the IND filing that we hope to deliver on in the first half of next year, and that would put us in a position to generate the top line immunogenicity data by end of '22 or early '23, depending on when the IND would enable us to get that study started. Finally, we believe that we'll be in a position to qualify for some of the regulatory accelerants like Fast Track, Priority Review or Breakthrough Designation, and you can see the target label that we're going after, which is identical to what's convention. So that was a quick overview. We're going to move into Q&A, but we think we have a large market opportunity with our PCV program built on an already industrialized platform. We think we've made some wise choices with regard to applying this across our pipeline. We think we've got the resources and particularly the balance sheet to work our way through the delivery of the clinical proof of concept data. So why don't I cut it there and hand it to Chi to lead us into the fireside chat component?

Thanks, Grant. Thanks for the introduction, presentation everything. Maybe you could start out coming out of the 1Q update earlier this week. Can you talk about maybe provide a bit more granularity as to the progress towards the IND filing in first half '22? There was some color provided in the press release regarding the company has made substantial progress and sort of milestone. Can you give us a bit more flavor towards what kind of IND-enabling studies have you completed? What are you hoping to complete over the next few months?

Yes. Yes. Thanks, Chi. Yes. This is a complicated business, and Pfizer has gone on record saying that their 20-valent version of Prevnar is the most complicated biologic ever attempted, and they're going from 13 to 20. And we're -- we've been quite ambitious. We're going from 0 to 24. And so as you point out, Chi, we have given some guidance. And just to put a little color around that, making 24 different drug substances that are these conjugates that need to meet certain physical chemical parameters is complex business. And one of the benefits of what we're doing is that these physical chemical parameters that have been established that we're leveraging for the application of the production of our vaccines is a very clear road map on what we need to deliver, and that correlates with immunogenicity and stability. So we need to hit those parameters. And what we had guided to was that there are 3 discrete steps of making these conjugates. You take a polysaccharide, you size them to get the right ratio of polysaccharide protein, then you activate them by attaching a linker. And then that last step is then attaching that linker to the protein to create the conjugates. So we've completed the first 2 steps of that work across all 24 of the serotypes that will be included. And we've been in the midst of doing that final conjugation step for the 24 drug substances. We had been progressing our way through that in the first quarter or end of year update that we put out a few months ago. And then we said, again, we're making substantial progress to the completion of those 24. So we're getting close, but we haven't gotten entirely granular about precisely where we are, but we're feeling good about the progress we're making and how that lines up with the guidance that we've given for the IND filing.

Awesome. Thank you for the color. Maybe looking a little ahead in terms of the Phase I evaluation, which I believe will be in the adult population. Can you remind investors what are the most important goals you want to achieve with that Phase I? What do you expect to learn about VAX-24? What's the sort of the key focus of the data set? I know that in the presentation, you talked about looking at immunogenicity top line data sometime in late 2022, early 2023. But I'll turn it back to you and see if you can provide any more granularity to that.

Yes. Yes. So that first study is going to be a combined Phase I/II study. So the Phase I part is going to go quick. It's literally 48 subjects. All we do is get a quick safety check. It is in healthy 18 to 39 year olds. The main event is progressing from that, which will happen just after a quick look to make sure nothing untoward was evidenced in the clinic. And what we're doing is so similar to what's been done conventionally. It would be a big surprise if we saw anything. These have been put into billions of people to date. And so once that safety box is checked, then the main event occurs. And that's this 1,000-subject immunogenicity study where we'll be able to generate data with VAX-24. We'll be able to compare those antibody titers to Prevnar 13 across the 13 strains that they've got. There's a possibility that we'll be comparing ourselves so Pfizer's 20 valent depending on when that product becomes available. And we'll also be then comparing to PNEUMOVAX 23 across the 23 common serotypes in that vaccine. And what we need to show is greater than or equal to 50% of the antibody responses relative to those standard of care vaccines, and it will be interesting. I mean we've modeled our vaccine to Prevnar 13, and we've seen really good comparative results. And what's been shown is that the 20-valent version of Prevnar certainly has lower antibody titers than what has been shown with Prevnar 13. So if that does end up being the comparator for us, it's effectively lowering the hurdle that we need to hit with regard to the antibody titers that we need to show with VAX-24. So we're going to have to let that play out a little bit. But that's really the key outcome that we'd be looking for from that study as those compared to the antibody titers.

Awesome. Maybe a follow-up question on the antibody titer. How predictive are these animal models? When you look back at the prior generation of vaccines, how predictive are these animal models that this speaks to the antibody titer? How predictive are these to human findings?

Yes. The way I would answer that question is to first orient the listeners that the model that we've been using, I didn't quite get into that detail, is a New Zealand white rabbit model. And the reason we chose that model is because it's the exact same animal model that both Pfizer -- really Wyeth, but Wyeth and Pfizer used as the proving ground for Prevnar conjugates before advancing them into the clinic. And obviously, that was a successful path. Likewise, we've mentioned at the outset, there is a second approved pneumococcal conjugate vaccine, the GSK market, it's called Synflorix, and they use the exact same New Zealand white rabbit model as the proving ground for Synflorix, which was also ultimately an effective vaccine and is now approved and used. But for them, unfortunately, they only had 10 conjugates versus 13 and the broader spectrum conjugate is the one that gets the usage and ergo, the reason why we have a level of confidence that our 24 valent, which is the broadest spectrum PCV in development, we have an opportunity for a preferred recommendation ultimately relative to the other PCVs that may be in the market at that time.

Great. If -- maybe next, can you talk a little bit about the pipeline landscape? What are other companies doing with a PCV vaccine? Are there other companies that develop 24-valent vaccines? And if there are, can you talk about how your approach differs conceptually from other pipeline competitors?

At last, I could hand the baton to one of my colleagues. Jim, do you want to make a couple of comments about the competition? Maybe touch on Pfizer, Merck and Affinivax?

Sure. Thanks, Grant. So there are 2 vaccines out there in late-stage development. That's the one from Pfizer, which is a 20-valent that Grant already alluded to. Merck has a 15 valent. Both of them are under review for the adult indication and the expectation is by midyear, they are most probably going to get an approval in the adults. For the pediatric, the studies are still ongoing, and it's a little bit harder to achieve the immune response necessary for licensure in the pediatric population. So we have to keep a close eye on those results as they come out. Both of those, though, as we mentioned, have the issue where as you add more and more of this carrier protein, you start to see immunological suppression, and it becomes more difficult. So each time you add an additional strain, you start to see a diminution of not just one, but all of the serotypes that are already in there. So if you go from 20 to 21, you can lose a little bit more and more. So we think that they're reaching what are the limits of their technology to be able to go and broaden their immune response. You mentioned Affinivax. Affinivax is using or targeting a 24 valent similar to VAX-24 at Vaxcyte. However, they're using a very different technology than the one that we are. We're using the tried and true, the established protein polysaccharide conjugate that's made Pfizer vaccines so remarkably effective. They're trying to use an affinity binding. And with that, you are going down a different regulatory pathway. You are going to have to do some more incremental proof. But more importantly, at least from my perspective, is the fact that you got to keep an eye on their ability to boost with this technology. They have some side effects in the sense that from an immunological perspective -- I guess it's not side effects, but it's off-target immunological responses, and that they actually generate what's called anti-linker antibodies. Those are antibodies not to the polysaccharide, which is what you want to generate, but to the linker that links the polysaccharide to the protein. And the reason this is so important is that if that happens, then when you give a booster, your immune response will have antibodies not against the disease, but actually against the vaccine. And so we have to keep an eye on their program as they come to fruition to see if those anti-linker antibodies actually create a diminution in the pediatric segment. So it might not be a problem in the adult. But as you probably know, the pediatric market is probably 70% to 80% of the total value. And so that's really the gem of this category, and that's where you want to end up.

Great. So maybe looking even further ahead, I think investors think about various pipeline approaches. Do you see the pneumococcal space having more of a preferred option of a certain vaccine type or more of a very competitive space? I think clinically, the hurdle of getting a perpetual ACIP recommendation appears to be pretty high historically. So I understand that we need to see the data first, first and foremost. But curious, based on the level of disease burden and what the CDC could realistically know in a few years after the launch of different vaccines, curious to hear your perspective on this topic.

Jim, do you want to take that one, too?

Sure. So from this category, historically, there have been preferential recommendations given outside of the U.S., where the Pfizer's 13 valent competes with GSK's 10 valent. So there is already a well-established precedent that regulatory -- or not regulatory, but actually recommending bodies like JCVI in the U.K. will recommend the vaccine that has the broadest coverage. Similar in the U.S., there's already been precedence set where the ACIP will have a preference for a broader coverage vaccine. And so we feel that they're coming out with a 24-valent vaccine versus a 20 or 15 will allow us to achieve that same preferential recommendation. So we will compete based on breadth of coverage and not so much immunogenicity or have to go up against the commercial wherewithal of a Pfizer or Merck.

Great. I know we only have 30 seconds left. Maybe just one last quick question. Do you have anything you want to discuss about an earlier pipeline? What sort of time line can we look into to hear the update on some of these earlier programs?

Yes, I'll take that just in brief. The second vaccine beyond our PCV franchise is a group A strep conjugate vaccine. We have a great deal of excitement about that. We've just nominated the candidate that we're going to advance into the clinic. We'll be guiding more specifically to the timing of that IND. But we're excited because of the opportunity to develop this vaccine to prevent disease in not only children, for which could create a new addition to the pediatric vaccination regimen, but also utility in adults. The invasive disease in adults caused by group A strep is actually more than triple what the invasive disease levels were when Pfizer obtained approval for Prevnar in adults. So this could be a very important vaccine at both ends of the age spectrum. And then finally, the other name program we have is a therapeutic vaccine to prevent or treat periodontitis, and this is a huge unmet need white space opportunity. There's 65 million Americans that suffer from this particular ailment, and there really aren't good solutions. So we do think that that's another big opportunity and both of those showcase unique aspects of what we can do with our cell-free platform that we don't think others can do, and we hope that they're going to create important new vaccines going forward.

Great. Thanks so much for joining us today.

Yes. Thanks for having us, Chi.